The industrial property market has begun its recovery — but only in Dublin and at that, it appears concentrated in the capital’s south-west corridor.
A recovery in manufacturing, and some retail, has led to the pick up in demand, while low capital values are prompting operators to buy rather than rent.
That’s according to the findings of a Q4 2013 report by Savills, who note there’s been “a record take-up of industrial space in Dublin as economic recovery drives demand”.
Almost three million sq ft was transacted in 2013, up 45% from 2012.
“There is now a growing sense that we are beginning to see a real turnaround in the economy. The manufacturing component of GDP, which is a critical driver of the demand for industrial space, increased by 2.1% in the year to September. This momentum appears to have continued through the winter period with the manufacturing PMI [Purchasing Manager’s Index] registering growth for the eighth successive month in January,” says economist and Director of Research at Savills, Dr John McCartney. Retail sales are “bouncing back... this will add further to the demand for warehousing space”.
“With market prices currently running at around half the cost of developing buildings, it has simply never been cheaper to buy industrial property in Dublin,” according to Gavin Butler, Industrial director at Savills, ” as a result, sales increased from 20% of market transactions in 2012 to 47% last year.”
Low capital values are also militating against new development of industrial buildings, and this will result in the market continuing to tighten in 2014, said Mr Butler. “With demand increasing and no new supply in the pipeline, we expect vacancy rates to continue falling in the medium-term. In particular we are likely to see a shortage of good quality accommodation over 1,000 sq m. in prime locations.”
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